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ELLIOTT WAVE ANALYSIS - Latest Market Commentary

Stock Indices

U.S. and European stock markets upheld their bullish bias during the last trading days. This was partly fuelled by inflation data for the Euro zone which recorded a 5-year-low and thus prompted expectations that the ECB might take into consideration further stimulus measures. Although this is not considered a ‘game changer’, it tallies with the prevailing upward tendency that is likely to carry equities a bit higher during the next few weeks. The S&P 500 retains original upside projections to min. 2014.12 but is likely to extend higher towards 2045.00+/- to maintain a correlation, albeit weak, with European stock markets. These are seen as the recent outperformers and also expected to continue outperforming during the next weeks – the Eurostoxx is measured to ultimate upside at 3400.00+/- to finalise a multi-month ending expanding-diagonal sequence; Germany’s Xetra Dax is shown engaged in a 5th wave upswing with targets projected above its all-time high to 10367.35. In contrast, Asian markets have calmed down a bit in the recent weeks. From an Elliott Wave perspective, this is ###in line with structural requirements – the Shanghai Composite, for example, is struggling to overcome the 2260.00-70.00 area which marks the completion of a ‘C’ wave within a contracting triangle. Wave ‘E’ within this pattern cannot exceed wave ‘C’ – that is why the probability clearly points lower from current levels for this index. Similarly, upside potential for the Nikkei 225 is limited. The late July high of 15759.66 marked the completion of a textbook expanding flat sequence – this is why a break above there is deemed unlikely. Instead, the index is shown with a high propensity for entering a 3rd wave downside acceleration within the multi-month five wave decline from 16320.22 – ultimate downside remains towards 12000.00+/-.

Financial Updates Currencies

Currencies (FX)

The US$’s recent high of 8272 was not broken which is in line with forecasts that describe an imminent reversal from current levels that would trigger a decline during the next weeks. The reason why a decline is expected is because the advance from the July low of 7974 can be counted as a completed five wave impulse – a three price-swing counter-trend correction is now expected to counter-balance this advance. Seen from the May ’14 low of 7890, the upward momentum is very strong – a 1-2-1 sequence is now visible which opens up the possibility of upside acceleration within a 3rd of 3rd. Shorter-term, however, the correction from 8272 is projected to downside at either 8157 (fib. 38.2%) or 8068 (fib. 61.8%). A similar setup applies for the Euro/US$. Last week’s low of 1.3153 could set the stage for a temporary upswing during the next weeks – idealised upside is measured towards the fib. 38.2% resistance at 1.3360 but could extend to 1.3489. Afterwards, the Euro is shown to enter its 3rd of 3rd downside acceleration which would corroborate ultimate downside to 1.2528 in the next months. Meanwhile, Sterling was slowly drifting lower during the last week but managed to stabilise at 1.6513. This tallies with ###the proposed double zig zag decline in progress from 1.7192 – a fib. 61.8% extension of the decline so far measures to 1.6105 which, extended by a fib. 38.2% ratio, projects to ultimate downside at 1.5708, very close to the 1.5680 retracement level derived by a fib. 61.8% ratio of the preceding multi-month advance. Thus, the 1.6513 low is seen as the end of wave ‘A’ of the first zig zag – a counter-trend upswing as wave ‘B’ is now required prior to continuation lower to finalise the first zig zag at 1.6105. US$/Yen is engaged in a smaller 4th wave counter-trend sell-off prior to 5th wave upside continuation. These price swings are part of a larger ending contracting-diagonal advance from 10081 that represents the finalising leg of a multi-month flat pattern with an upward bias – a ‘slanting flat’ in Ralph Nelson Elliott’s own words. Ultimate upside is measured to 10463-94 – once achieved, await a reversal signature to validate the resumption of the larger downswing with ultimate objectives remaining unchanged to 9242-12.

Financial Updates Bonds

Bonds (Interest Rates)

US10yr yields have broken critical short-term support at 2.355% which validates downside continuation towards 2.287% during the next trading days. This decline is deemed the finalising phase in a multi-month 4th wave expanding flat pattern that began from the Sep.’13 high of 3.008%. Thus, a reversal from the 2.287%+/- area should trigger a substantial 5th wave upswing during the next several months, with upside projections to 3.850+/-. Although US10yr yields are forecast to nudge briefly into lower lows, the T-Note futures are not expected to break above their equivalent August high. Their recent underperformance is seen as the effect of the different pattern structure ###– whilst the US10yr yield is engaged in a more dynamic expanding flat sequence, the T-Note futures have been unfolding into a contracting trading range during the last several months, a contracting symmetrical triangle in Elliott’s terms. Synchronised with the finalising sell-off in the U.S., Germany’s DE10yr yield is now approaching ultimate downside to 0.849% that is measured by a fib-correlative 61.8% ratio between primary waves 1-3 and 5 within the larger multi-year decline from the July ’08 high of 4.705. As this decline from 4.705% is only the final part of a much longer multi-decennial downswing, a reversal from the 0.849% area is expected to initiate a major generational uptrend.

Commodities

Gold’s upswing during the last trading days might already have completed at the 1296.56 high. This allows for immediate downside continuation in an accelerative manner as the precious metal is forecast to enter the 3rd of 3rd within the five wave expanding-impulse sequence from 1344.93. There is, however, still the danger that a 1-2-1 sequence unfolded from the 1273.08 low as this level is close to the ‘crossroad’ that differentiates between a bearish and bullish scenario for gold to take place during the next months. According to the bullish interpretation, the 1273.08 low completed a single zig zag sequence from 1344.93 which would suggest upside continuation towards 1475.00+/- in the months ahead. Yet it would require upside acceleration from current levels – as long as this is not the case, the probability clearly points to the bearish scenario that advocates downside continuation in the months ahead, with ultimate objectives remaining unchanged towards 1096.00+/-. Despite a differing wave pattern structure, silver is in the same position as gold. The decline from its 21.60 high came to a halt at 19.28. In the bullish and alternate interpretation, the decline could be ###interpreted as a completed double zig zag sequence as a larger 2nd wave. Thus, 3rd wave upside acceleration would be expected from current levels. Very short-term substructure of the advance from 19.28 however appears corrective. This adds evidence to the bearish and preferential scenario that interprets the decline from 21.60 as a successive 1-2-1-2-1-2-1-2 sequence with downside acceleration to follow. Thus, an accelerative break below 19.28 would corroborate continuation lower and reinforce ultimate objectives to 17.43 to be approached in the months ahead. Crude oil has staged a reversal signature from 92.50, close to original downside objectives at 92.17. It remains to be seen whether this current advance will extend into a five wave sequence which would indicate that the 92.50 low completed a multi-month expanding flat pattern. Failure to do so would otherwise shift the probability towards downside continuation in the months ahead, with ultimate objectives measured to 77.28.

LATEST ARTICLES

THE ‘INFLATION-POP’ - PRECIOUS METALS SET TO SURGE INTO RECORD HIGHS

Bloomberg hosted a Precious Metals Forum on 23rd May and WaveTrack International was invited to present our latest Elliott Wave price-forecasts. The event was sponsored by the CME Group and Johnson Matthey.

OUTLOOK & FORECASTS FOR 2013

Highlights:

  • The 2013 outlook for global stock indices and commodities remains very bullish and is entering the last stage of the ‘inflation-pop’ phase that originally began from the post-financial crisis lows of 2008/09
  • This is expected to ignite another period of asset buying that increases risk-on multiples by a minimum 45% per cent and in some cases as much as +300% per cent, sending some global stock indices and commodities into record highs
  • Shorter-term, there is a danger of a downward adjustment of -5-8% per cent, but then sharp price advances to resume
  • Commodity related stock indices and equities are expected to outperform as a sector during the next 12-16 months
  • Banking stocks to participate, but most will not exceed their pre-financial crisis highs

As always, this year’s Outlook & Forecasts for the next twelve months are created applying the Elliott Wave Principle for the assessment of pattern and price amplitude, also Cycle Analysis for the timing of the larger trend reversals. Not always do they jive, but they seldom contradict and more often, provide valuable insights into one or two variations of a similar theme within a seemingly unlimited amount of possibilities.

Even though this report outlines the price expectancy of all asset classes for 2012 it will also illustrate how this coming year fits together into the larger picture. The reasoning behind this is to move away from the 'black-box' stereotype and show you why the results relate to their specific outcome. Overall, this report deals with two different time-periods – long-term and inter-mediate term. Long-term refers to the uptrends from the Great Depression of 1932 onwards and inter-mediate term for the coming year and into 2013.

HOW TO INTERPRET EACH ELLIOTT WAVE CHART

What do you see when looking at an Elliott Wave chart? Just lots of numbers & letters overlaying the price data? – or do you see definable patterns that are immediately familiar? And how do you interpret the results of the analysis and put it into an effective trading plan? Read on and test your own knowledge of these subjects and much more...

A COMMODITY SUPER-CYCLE?

Recent reports of a Commodity Super-Cycle grabbed my attention for two reasons – first, this is diametrically different to the outlook I foresee developing during the next decade, and second, this terminology has surfaced at a time when various commodities have already undergone large percentage gains measured from the Feb.'09 lows

THE 'DEFLATIONARY SCENARIO'

The primary theme of this presentation focuses on a 'Deflationary' outlook, forecast as the dominant aspect continuing during the next decade. This is derived from analysing the Elliott Wave pattern structure of the CRB (Cash) Index during its expansionary period of the last 76 years.

THE 'FLASH CRASH'

The Update Alert! messaging service of EW-Forecast Plus responded to the sharp collapse and the following recovery of US stock indices during the volatile trading session on the 6th May.

OUTLOOK FORECASTS FOR 2011

This analysis centres around the S&P 500 that is used as a proxy for other global indices. The great bull market beginning from the 1932 low ends 68 years later in 2000 - other global indices peaked later in 2007 (75yrs) – some still continuing to progress.

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TESTIMONIALS

"I just wanted to congratulate you on the EW-Compass reports launch. I'd say all the work you've all put into this project is well worth it… never cease to be amazed by the harmony that you find between the fib relations you highlight and the Elliott count you propose. You are a true descendant of RNE, and I'm quite sure he'd have really loved to see your work… Another aspect that sets you apart is your deep knowledge of the how and why of pattern relationships between higher & lower degrees of the same price action. So much to learn there". - T.S.

ELLIOTT WAVE PATTERN

INTRODUCTION TO THE WAVE PRINCIPLE

The Wave Principle, often referred to as Elliott Wave is a unique methodology that applies Natures Laws, those encompassing the Natural Sciences and Universal Geometric Philosophies to the financial markets. It allows us to view price fluctuations as an organised process that can be non-linearly extrapolated to gain a glimpse into the future direction of trends, counter-trends and amplitudes on any market or contract traded around the world.

Expanding Diagonal Patterns - Do they actually exist? - Elliott's inclusion of the Contracting Diagonal

In R.N.Elliott's original treatise of "The Wave Principle (1938)", he introduces us to diagonal patterns for the first time on page 21. Under the heading, Triangles, Elliott describes the difference between horizontal triangles that represent hesitation within an ongoing, progressive trend and diagonal triangles that form the concluding 5th wave of a larger five wave sequence.

NEWS & EVENTS

Tradersworld Online Expo #12 – Starts 12th November 2012

Peter Goodburn will be presenting his latest Elliott Wave analysis at the 12th Trader Expo held online for 7 weeks starting on 12th November 2012 and ending in the new year on 6th January 2013. Peter’s presentation is entitled “Elliott Wave Price Forecasts & Cycle Projections – Three Phases of the 18 Year Bear Market ~ ‘Shock–Pop–Drop’” for more information visit http://tradersworldonlineexpo.com/

Announcement: 123rd Battery Council & Trade Fair Convention in Miami, 1-4 May 2011

Peter Goodburn will be presenting his latest Elliott Wave analysis at the 123rd Trade Fair Convention of the Battery Council in Miami, 1-4 May 2011. Peter’s presentation is entitled "The Historical Price Trend of Lead and Applying the Elliott Wave Principle to plot its course into the Future".

ELLIOTT WAVE PRICE-FORECAST UPDATES